Stephen Pearce on Radio Derby 6pm Tuesday

[Foreveram]

26 minutes ago, duncanjwitham said:

I have no memory of us pulling an expert at the last minute (and I read the IDC reports very thoroughly at the time).  There was something to do with their expert witness producing a report at the last minute, and we were offered the chance to delay the hearing and prepare a counter argument to it, but we declined to.  Not sure if this is what you are thinking of?  Presumably we thought our arguments were sound enough and didn't want the whole thing dragging out even more.

From what I remember (and my retelling may be slightly biased...), we put our accountant up as a witness to explain what our policy actually was, and there was a qualified accountant on the panel, who is supposed to be there to understand the accounting stuff.  We presented our policy, we believed it clearly met the accounting rules as they were written, so further expert witness testimony was not needed.  The EFL effectively put up an expert witness to argue that standard accounting terms didn't mean what everyone thought they meant, that up is down, the sky isn't blue etc. 

So the original panel basically ignored their expert witness on the grounds he was clueless, took the evidence of our accountant and the guy on the panels own experience to rule in our favour.  The expert witness didn't even understand the rules he was there to give evidence on.  Then the appeals panels basically said you can't do that - your accountant is there as a factual witness not an expert one, and the panel member is there as a judge, not a witness.  So the only expert in the room says up is down, so for the purposes of this decision, up is officially down.

Basically, we screwed it up.  If we had found any independent expert witness to stand there and say what we did was fine, it would have been he-said she-said on expert witnesses and the appeals panel would have left the original decision as is.  And given that even the EFL's own choice of forensic accountant on the panel agreed with our policy, it shouldn't have been difficult to find some else to agree with it.  But I stand by that we shouldn't have had to do that.  The purpose of having an expert on the panel is to deal with stuff like this.

At the end of the day the EFL didn’t have to  appeal the decision, they could have accepted it, but Mr Gibson insisted they did.

[duncanjwitham]

5 minutes ago, Foreveram said:

At the end of the day the EFL didn’t have to  appeal the decision, they could have accepted it, but Mr Gibson insisted they did.

They were always going to appeal if they could find a reason.  And likewise, if the original decision had gone against us, we would have appealed too.

[G STAR RAM]

1 hour ago, kevinhectoring said:

The stadium was let at an undervalue for a start. And I’d think that at the very least the ongoing stadium rental payable by the club would have been set off against the deferred purchase price.

If you look at 202’s balance sheet before the sale to DC the payable to the club will indicate how much of the £82 m was actually paid over.  

Impossible to tell from their accounts 

[Foreveram]

39 minutes ago, duncanjwitham said:

They were always going to appeal if they could find a reason.  And likewise, if the original decision had gone against us, we would have appealed too.

Why though when an independent panel had come to a decision did they feel the need to appeal it.

[duncanjwitham]

2 minutes ago, Foreveram said:

Why though when an independent panel had come to a decision did they feel the need to appeal it.

Because they were made to look very, very stupid by the original decision.  They made a massive song and dance about how naughty we'd been, dragged us through the mud for years about it, and then when it came down to it, it turned out we were right all along.  They'd employed two experts who knew absolutely nothing about the subjects they were supposed to be experts on, and got called out for it in a big way.  Wasted years of people's time and who knows how much of the league clubs money.  After all their shouting, we basically ended up with a slap on the wrist for a very minor deficiency in our record keeping.  Of course they were going to appeal that.  And that's not to mention the pressure being put on them by 'Boro and co.

[Foreveram]

4 minutes ago, duncanjwitham said:

Because they were made to look very, very stupid by the original decision.  They made a massive song and dance about how naughty we'd been, dragged us through the mud for years about it, and then when it came down to it, it turned out we were right all along.  They'd employed two experts who knew absolutely nothing about the subjects they were supposed to be experts on, and got called out for it in a big way.  Wasted years of people's time and who knows how much of the league clubs money.  After all their shouting, we basically ended up with a slap on the wrist for a very minor deficiency in our record keeping.  Of course they were going to appeal that.  And that's not to mention the pressure being put on them by 'Boro and co.

Your last sentence is the telling one though. Presumably the appeal would also have cost more money, I wonder what the consequences would have been if we had won the appeal.

[RoyMac5]

2 hours ago, kevinhectoring said:

...there was not a single document that we could produce which related to our estimation of player values. This led the LAP to believe we were engaged in manipulation of the numbers...The other big problem was...that kicked the whole thing off, namely that the rules are aimed at creating a level playing field for 72 clubs and that all except us used the same approach. We should have seen the risk and we certainly should have taken a ‘big 4’ technical opinion before stealthily adopting the policy. The problem is, a supporting big 4 opinion would probably have required a rigorous approach to player valuation. These are precisely the sorts of points on which a strong CEO would have challenged MM. 

 

 

Unless of course it was the CEOs idea? As I suggested before it was unlikely that Mel had the knowledge required to come up with the ideas we used to squeeze FFP rules.

The level playing field idea is an interesting point, we obviously weren't seen as being innovative. 😄

Edited February 23 by RoyMac5

[duncanjwitham]

1 minute ago, Foreveram said:

Your last sentence is the telling one though. Presumably the appeal would also have cost more money, I wonder what the consequences would have been if we had won the appeal.

The entirety of the EFL's actions (as a governing body that is, not the league as a whole) only make sense through a lens of them just wanting their cushy little existence to go on, and not be bothered by anything.  They were quite happy to let us get on with doing whatever we wanted, until 'Boro and co started threatening them, so they felt they had to act.  They buried their head in the sand about 'Boro and co's actions during our admin and waited until Morris finally stepped in and sorted it out.  They're doing their best to ignore issues at other clubs like Reading.  They just want the world to leave them alone to their prawn sandwiches.

I think if we'd won the appeal, they would have maybe let it go, as that was possibly a big enough stick to deter 'Boro.  They'd probably amend the rules to force straight-line amortization for everyone and stop stadium sales counting for FFP going forwards (which they did anyway on both counts).  But no retrospective changes for our accounts.

But honestly, that first IDC report, particularly the bit about the stadium valuation, should have ended them as a governing body.  There should be no coming back from spending hundreds of thousands of pounds having a guy who'd never ever valued a football stadium (and had literally no clue how to go about it) redo a disputed valuation, and then construe an entire set of charges and tribunals off the back of it.  The clubs themselves should have kicked them out for the sheer abuse of power and waste of resources.

[FlyBritishMidland]

2 hours ago, Ghost of Clough said:

There was nothing to stop other clubs adopting the same approach, so it was as if it was an 'unlevel playing field'. In fact, further down the line it would have put us at a disadvantage before evening out.

The club could have called upon 'The big 4', but the audit file had been reviewed by the ICAEW and approved as compliant. The IDC also stated "[evidence] was consistent with the Club having been able to determine the pattern of its consumption of future economic benefits from its ownership of player registrations ‘reliably’"

You also must have misremembered that about our expert witness. "The Club did not serve a report from or call evidence from an expert accountant... It took the decision not to call any such expert evidence having seen the factual evidence served by the EFL". When the EFL wanted to submit a late report, the Club weere given another option to call upon a witness.

You’re right there.  We were in a mess and took a different approach compliant with accounting rules. The problem is that that approach isn’t custom and practice in the football world, hence the EFL updating their processes.

A strong regulator should have done 1 of 2 things.  They should either have told us we can’t do that, it gives us an advantage and we must do what the other 71 clubs do and changed their processes straight away.  Or, they should have that that’s OK but not for that first year we did it.  That way they could have made it clear that that is an option to other clubs from the following year.  Either way makes it transparent with a level playing field.  They did neither and let rumble on, to our cost.

[kevinhectoring]

2 hours ago, Ghost of Clough said:

There was nothing to stop other clubs adopting the same approach, so it was as if it was an 'unlevel playing field'. In fact, further down the line it would have put us at a disadvantage before evening out.

Every other club adopted the same approach tho’. And given the mess we got ourselves into, only a lunatic club would now change its policy. So the effect of the ‘policy’ decision was likely to ensure a common approach going forward. (I know that by its terms the LAP decision allows different approaches, but the effect of the decision and surrounding circumstances is to discourage anyone from changing)

2 hours ago, Ghost of Clough said:

The club could have called upon 'The big 4', but the audit file had been reviewed by the ICAEW and approved as compliant. The IDC also stated "[evidence] was consistent with the Club having been able to determine the pattern of its consumption of future economic benefits from its ownership of player registrations ‘reliably’"

You’ll know better than I do, but I’m thinking ICAEW review certainly does not constitute their sign off on every technical point that underpins an audit. Or indeed on any technical point … 
I like ‘having been able to determine’.  The IDC knows that on appeal, evidence is not reconsidered so comments like that are included to reduce the likelihood their judgement is successfully appealed. (No one likes being overturned.) Did we put forward evidence we had in fact carried out the determination in a consistent manner? 

2 hours ago, Ghost of Clough said:

You also must have misremembered that about our expert witness. "The Club did not serve a report from or call evidence from an expert accountant... It took the decision not to call any such expert evidence having seen the factual evidence served by the EFL". When the EFL wanted to submit a late report, the Club weere given another option to call upon a witness.

‘also’ !

It’s true I may have misremembered. But make no mistake, our legal team are the only people who know why we called no expert. If our expert was wobbling, for example , we would hardly put that forward as a reason for not calling him 

[Crewton]

IIRC it was DCFC's auditors who came up with the idea of using a different amortisation policy than the standard straight line method, but I'm not sure even they owe anyone an apology for the EFL being obtuse.

[G STAR RAM]

2 hours ago, kevinhectoring said:

 You’ll know better than I do, but I’m thinking ICAEW review certainly does not constitute their sign off on every technical point that underpins an audit. Or indeed on any technical point … 
I like ‘having been able to determine’.  The IDC knows that on appeal, evidence is not reconsidered so comments like that are included to reduce the likelihood their judgement is successfully appealed. (No one likes being overturned.) Did we put forward evidence we had in fact carried out the determination in a consistent manner? 

Having be subject to audit file reviews by the ICAEW in the past, I can assure you they are very thorough.

[europia]

22 hours ago, G STAR RAM said:

Complicit in?

If it's not obvious to you: 

The reckless and chaotic financial management that brought humiliation and dishonour to a once great football club, and almost its total demise. 

[Herdwick Ram]

4 hours ago, Crewton said:

IIRC it was DCFC's auditors who came up with the idea of using a different amortisation policy than the standard straight line method, but I'm not sure even they owe anyone an apology for the EFL being obtuse.

Incorrect, it's the directors who decide the accounting policies ( which are clearly stated in the Financial Statements ), and it's the Auditors responsibilty to test these policies when forming their opinion as to whether the accounts show a "true and fair" view.

It would be entirely inappropriate to "come up" with a policy, and then audit it too, and would compromise their independence.

 

[Crewton]

54 minutes ago, Herdwick Ram said:

Incorrect, it's the directors who decide the accounting policies ( which are clearly stated in the Financial Statements ), and it's the Auditors responsibilty to test these policies when forming their opinion as to whether the accounts show a "true and fair" view.

It would be entirely inappropriate to "come up" with a policy, and then audit it too, and would compromise their independence.

 

Here you are fella - you can find it for yourself in the EFL v DCFC decision document from 2020, from item 47) onwards:-

https://www.efl.com/contentassets/c9fc5dceaa7f4b62b81dca0b9e2f7c9d/efl-v-derby-county--decision.pdf

 

[duncanjwitham]

7 minutes ago, Crewton said:

Here you are fella - you can find it for yourself in the EFL v DCFC decision document from 2020, from item 47) onwards:-

https://www.efl.com/contentassets/c9fc5dceaa7f4b62b81dca0b9e2f7c9d/efl-v-derby-county--decision.pdf

 

I suspect the suggestion there is that we got the auditors involved early in approving the new methodology, rather than having the auditors design it themselves.  Basically we didn’t want to submit the accounts with the new stuff in and have them go “WTF? Oh hell no”.

[G STAR RAM]

2 hours ago, europia said:

If it's not obvious to you: 

The reckless and chaotic financial management that brought humiliation and dishonour to a once great football club, and almost its total demise. 

Its only not obvious to me as I have zero knowledge of how the club was operating at the time or how much input or influence Pearce had on decisions. Having been lucky, or unlucky, enough to have met Morris it would not surprise me if he was running the show himself. 

[G STAR RAM]

1 hour ago, Herdwick Ram said:

Incorrect, it's the directors who decide the accounting policies ( which are clearly stated in the Financial Statements ), and it's the Auditors responsibilty to test these policies when forming their opinion as to whether the accounts show a "true and fair" view.

It would be entirely inappropriate to "come up" with a policy, and then audit it too, and would compromise their independence.

 

That doesn't mean that the accountants/auditors could not suggest new policies. 

Recommending a fully compliant policy to a client is hardly compromising their independence. 

[RoyMac5]

8 hours ago, G STAR RAM said:

That doesn't mean that the accountants/auditors could not suggest new policies. 

Recommending a fully compliant policy to a client is hardly compromising their independence. 

Or that the CEO Pearce - a highly qualified accountant - might have put the idea forward to those accountants.

Edited February 24 by RoyMac5

[G STAR RAM]

32 minutes ago, RoyMac5 said:

Or that the CEO Pearce - a highly qualified accountant - might have put the idea forward to those accountants.

Yeah he might have done.

How 'highly qualified' is he out of interest?